"He comes across as a bit quirky and laboured in speech, but his track record is up there with top guys..."
A trifle harsh, Games... you'd hardly expect to have a fund manager trained at RADA. And speaking into an inanimate camera, rather than to an audience, ain't easy at all...
Some interesting points, of course, though we've "heard that song before"... and doesn't give us much of a clue as to where we go from here. Other than his expectation for more, and more major, M&A... I hope he's right, but I will believe it when I see it, I've been waiting a while now. And unlike the Trainspotter, I am not particularly possessive when it comes to holding on, if and when someone does come calling for my IMB, my ITV, my VOD, my AZN ... (etc etc).
Decent track record for sure, though not without blips, and I wonder how well he'll fare if (as?) and when the market mood shifts from Growth/Momentum and back to Value? These have been very favourable times for his particular investment "style" - I don't doubt he will adapt, but how successfully?
On that note - GBP/USD pushing up near 1.38... I wonder when stocks such as ULVR get hit by FX shock? At the very least, earnings forecasts will surely have to come down - for FY18, if not FY17. You could say that general "expectations", as reflected in the SP, have already come down for RB, and are on the way down for ULVR - but much less so for DGE, for whom - lest we forget - some 80-90% of all growth last year came from FX. Swings and roundabouts... and I worry that the market is turning a blind eye.
Maybe this is the year that I do finally get to own ULVR? Or RB... though they have their own, ex-FX issues. Or maybe even DGE... though I fear that is unlikely...
We could be witnessing the bond proxy stocks rolling over - the high price you now have to pay for a small level of 'reliable' growth looks to be rolling over. Sectors of the market left behind by the 10 year rally are catching up. Normally the time to get out is when the leaders of the rally start to go down while the laggards catch up. IMO only. Might be wrong but come Monday i'm also selling Diageo i think.
Point about Unilever.com is interesting.
My son buys hid catfood, washing up liquid, toilet roll, dishwasher and washing machine tabs etc on line with Amazon Prime. The brand he buys is Amazon... for service delivery.
That brand loyalty will have profound implications for ULVR, P&G etc
Today is a sad day for me - i have sold my Unilever shares. I said to myself recently if this went below £40 i would sell so I have. Doesn't feel good. My thinking was other than i need some pennies for a house...they've had the bid, had the buyback, had the currency boost and had the sale of spreads....so what can push the price higher. Linked to that I have no idea about all these brands they are buying and the price being paid. Its all happening v quickly which surely increases the risk.
Im probably completely wrong and they immediately go to £50.
"And how much margin does Tesco - or Amazon, or Joe Schmo corner store - make from selling them on?"
Good question - the wholesale typical markup is what ?% of the retail price?
I'd imagine there is plenty of scope for direct sales, irrespective of the costs to set up delivery options, as the wholesale price is significantly below the retail .
If Unilever don't do this the likes of Amazon will do it via it's competitors and they will undercut the margins across the sector -- it will have an impact.
"""And of course, there is no point in having one single online presence as Unilever.com - Unilever as a brand has no end-market presence, no-one knows who they are! You ask 100 ordinary (ie. non-stock-market-literate)"""
This is not difficult, Unilever already label every product with the "U" symbol and many have got to know this. A simple add campaign pointing people to the web site with a listing of the main products -- promotional follow up adds taking people to the site for special offers on some key brands with bulk order discounts.
It wouldn't take long for people to become very familiar with it.
No I'm happy that Unilever is great at R&D and product development, but the changes tell me that this isn't going to be enough in a changing world.
Unilever isn't taking the best advantage of the media opportunities to sell it's products in my view.
"But if ULVR is going hoity toity high margin discretionaries, selling on the internet is the way to go."
But Games, you are still talking predominantly small-ticket, regular-repeat-purchase units - high margin or not. And punters can buy them from most existing retailers, big and small, in store or online. And how much margin does Tesco - or Amazon, or Joe Schmo corner store - make from selling them on??
No, the vast bulk of the margin is to be made in the products' development, then manufacture, then distribution and supply... Sure, ULVR could maybe make slightly higher-still margins from going 'vertically-integrated' and retailing them out online - but retail would require new (and different) people and processes, new systems and networks, new logistics infrastructure and expertise. All of this means new, incremental costs (operating and capital) - yet how much incremental return would they really earn on this extra capital employed?
And of course, there is no point in having one single online presence as Unilever.com - Unilever as a brand has no end-market presence, no-one knows who they are! You ask 100 ordinary (ie. non-stock-market-literate) people, at least 90 will never have heard of Unilever, but go through their cupboards and fridge/freezer and they'll probably have 10, 12, 15 Unilever products tucked away. So they would have to develop, and fund, not one but dozens and dozens of online "presences" and capabilities, brand by brand.
No, it's a "BLUFF" from me! Their better chance of earning (further) decent ROCE (on an incremental basis, the only true 'ROCE' that matters) lies in ongoing R&D, new product development, innovation with existing brands, and creativity and clout in marketing and advertising, through all available channels (including online), on a brand-by-brand basis. All of which is what they already spend a large proportion of their time and money doing.
And/or they can just chase higher incremental ROCE through persistent M&A expansion - whether small scale or something a bit more meaty. Higher risk, of course - and perhaps too much so for some shareholders (with good reason) - but at least the potential rewards are there...
Its very simple - spread sales are falling - the market has shifted so , although they may be v profitable and high return the future is poor and thus returns are likely to fall UNLV reckon the future best lies in personal care which , I happen to agree with ....as its growing , high margin and captures the consumers mind unlike the distinctly unattractive Flora. Polman has done a great job here and the future looks bright .
Think about it wouldnt you rather be valued on a sexy rating like LOreal ?
"But not sure exactly what online strategy you suggest?! Looks to me like their "strategy" is spot on, ie, let all the retailers (including Amazon) scrabble strenuously around flogging the pots and packs at margins of 2-4% (if they are lucky)"
Bill -- simples -- given that they are offloading all the low cost low margin stuff anyhow, they can rely on the supermarkets to take that on with the new owners.
But if ULVR is going hoity toity high margin discretionaries, selling on the internet is the way to go.
"I don't see any more transparancy, an online strategy, and they are still offloading good products (less discretionary products) at unattractive prices -- the recent sale of spreads is a prime example... The recent changes at Unilever are all about Polman protecting his pride, position and legacy. Corporates in the hands of such are at risk."
Definitely agree with you, Games, on transparency - the disclosure culture feels distinctly Pravdaesque - and on Polman... I still feel he has a reckoning coming for his behaviour during the Kraft episode. Not convinced on Spreads - didn't look a great price at all, sure, but I think it will prove a well-timed dumping... I challenge the idea of plastic spread as "good" product, the market has moved away from it, probably decisively, and it leaves busted brands, however old and "established" they may be.
But not sure exactly what online strategy you suggest?! Looks to me like their "strategy" is spot on, ie, let all the retailers (including Amazon) scrabble strenuously around flogging the pots and packs at margins of 2-4% (if they are lucky), while they themselves rake in 20% (give or take) by keeping them appropriately supplied and concentrating capital and effort on their far-reaching and formidable distribution and supply networks and capabilities.
Maybe if the internet, eventually, disintermediates the retail function entirely they will have to think again, but no sign of that as yet... the likes of Amazon have disrupted it but certainly not rendered it redundant. Retail networks and channels are entirely different, in scope and nature, from factory-gate supply chains, and ULVR have a very clear sense of where they fit in... can't imagine Polman or any of his (inevitably well-heeled) successors being enthralled by the idea of flogging two tubs of Marmite and a box of Persil to Barry Bloggs from Bolton, and then trying to work out how to get them to him without losing a packet (of profit, not soapflakes).
Where ULVR need to be "online" is in people's faces and eyeballs, through their marketing and branding activities... and they are (and always have been) perfectly competent here, even in your "changing world" - though this is also where your WPP (et al) come in. Albeit they will have to stay on top of it to thrive... and that goes for Sir Martin as well is Saint Paul!
Valueman -- it is indeed, has anything changed though?
I don't see any more transparancy, an online strategy, and they are still offloading good products (less discretionary products) at unattractive prices -- the recent sale of spreads is a prime example.
The recent changes at Unilever are all about Polman protecting his pride, position and legacy. Corporates in the hands of such are at risk.
Don't get me wrong Unilever is a great company and I'd be a reluctant seller, but they need to get a shift on with changing to meet a changing world.
This article highlights the areas of focus Unilever is adopting to boost it's sales and margin's.
What worries me most are three things, 1. a move to more and more discretionary items irrespective of the margin boost, and 2. the lack of an online sales strategy. 2 seems particularly worrying with the growing threat of Amazon et al in the retail space.
3. The lack of transparancy in it's reporting - I want to know how much they are paying for stuff, and how well their product departments are doing.
The "sustainable practices thingy" is all well and good but if your average punter becomes too lazy to go out and buy physically, or he's too busy running his own online business, or he's simply too smart to waste his or her time to visit physical shops, how are Unilever to sell it's new wonderful products produced from it's changing R&D focus?
This worries me a tad as ULVR is still 3.56% of my wad.
Yes, I think we all agree LKH is sadly missed for his astute pithy comments and gentle sense of humour. Unilever appears to have lost a little of its gloss but I guess the sale of the Spread business was already built into the price. Nevertheless in past years the SP usually ends on a strong note and I expect this year to be no exception, especially in this increasingly uncertain world of ours.
"Unilever has agreed to sell its margarine and spreads business, which include Flora and ProActiv, to private equity giant KKR for 6.8bn ($8bn, £6bn)..."
Mildly disappointing, I would say... for all the ongoing commentary (doubtless, carefully fed into the media) on what looked like a fairly competitive bidding process, they get no better a price than the one they first thought of.
And of course - as per previous posts on here - we have little idea on the "exit" financial metrics... so hard to say whether it's a fairly low price for a business still churning out a decent quantum of profit and cash flow, or actually a very good price for a business where financial performance is showing serious secular decline.
FWIW I think they are well out of it, the outlook for margarine is pretty dire IMHO (at least in most developed markets) and while I doubt the multiples do look great, every chance the price they would get for it would only go steadily lower over time. KKR are doubtless getting it cheap enough to make something of it... Will be interesting to watch what they do, but I wouldn't want to be working for Flora going forward!
In a pretty thin statement (in line with the usual ULVR economy with disclosure),the following stood out for me:
"Unilever intends to return the net cash realised to shareholders, unless more value-creating acquisition alternatives arise."
Not sure if this is new? At least as an explicit commitment... if so, should be enough to offset any consensus disappointment that the protracted auction process has not secured a more premium price.
PS. I have to say, I am sure that LKH - as a confirmed Spreads supporter - would have disagreed with some, if not all of the above, and I remain saddened that he is not here to say so in his usual eloquent, but efficient style...
Italys antitrust agency said on Wednesday it had fined Unilevers Italian unit more than 60m (£53m) for abusing its dominant position in the countrys ice cream market.
It said Unilever had abused its position in single-wrapped so-called impulse ice creams, intended for immediate consumption, which it sells through its Algida brand.
The local unit of the worlds biggest ice cream maker said in a statement it rejected the agencys conclusion and would appeal.
Italian authorities started the probe in 2013 when a small producer of organic fruit lollies called La Bomba accused Unilever of forcing local retailers not to sell its popsicles.
La Bomba, based in the seaside town of Rimini, said Unilever had struck deals with operators of beach resort, bars and campsites to exclusively sell the bigger firms ice creams.
La Bomba makes less than 1m a year.
Italians ate 5.15bn-worth of ice cream in 2015, according to the antitrust agency, and sales of individually-wrapped treats were worth 780m.
The market for ice cream (to be consumed) outside the home is a highly competitive one in which artisan and industrial, bulk and packaged products compete for the consumers attention in a fragmented landscape that is like no other in Europe, Unilever said.
Selling the Magnum, Carte dOr and Cornetto ice cream brands as well as other food, home and personal care goods, Unilever makes around 1.4bn a year in Italy.
Unilever can appeal the ruling at a regional court.
"London/Rotterdam, November 28th 2017 - Unilever will hold its annual investor event on November 29th and 30th 2017. The presentations will include an update on Unilever's 2020 programme to accelerate sustainable shareholder value creation. Connected 4 Growth continues to progress well and is expected to deliver growth ahead of our markets, which in current market conditions is expected to translate into underlying sales growth of 3-5% per year between now and 2020.
The 5-S supply chain savings and zero-based budgeting programmes are delivering faster than planned, and the integration of Foods and Refreshment into a single business unit is, equally, progressing well. These actions enable reinvestment behind our brands for growth, and provide momentum towards our underlying operating margin target of 20% by 2020.
The outlook for 2017 is reconfirmed. We continue to expect underlying sales growth within the
3 to 5% range, an improvement in underlying operating margin of at least 100 basis points, and strong cash flow delivery.
Unilever's portfolio continues to be developed at an accelerated pace to ensure the platforms are in place for long-term value creation by being in attractive market segments and sales channels. So far this year, nine acquisitions have been completed or announced. The exit from our spreads business via sale or de-merger remains fully on track.
At the same time, Unilever has also continued to simplify its capital structure and ensure it remains at the forefront of good corporate governance. This includes the acquisition of the outstanding Unilever N.V. preference shares. As previously announced, the Board is conducting a review of the dual-headed legal structure.
This review is progressing well and the Board considers that unification with a single share class would be in the best interests of Unilever and its shareholders as a whole, providing greater ongoing strategic flexibility for value-creating portfolio change.
Unilever is a geographically diversified business with a very small corporate centre compared to the scale of its global operations. Reflecting this, following any unification, we envisage one lean, agile corporate centre.
The review by the Board is continuing and the outcome will be announced in due course. Whatever the outcome, upon any unification, the Board intends to:
· Maintain listings in the Netherlands, United Kingdom and United States
· Continue to apply both the UK and Dutch corporate governance codes
· Terminate the N.V. preference shares
These actions would be subject to the appropriate approvals.
Unilever: In Need Of A Catalyst
Nov.27.17 | About: Unilever Plc (UL)
- Unilevers Q3 trading statement brought a halt to the rally sparked by its post-Kraft Heinz commitments to cut costs and sell its spreads business.
- Its current CEO has announced his intention to retire, and a search for a replacement has been launched.
- The shares are not cheap relative to Unilevers growth prospects, and while the consensus calls for solid gains next year and in 2019, this seems optimistic.
When Kraft Heinz (NYSE:KHC) made its abortive bid for Unilever (UL) (UN), and Unilever subsequently committed itself to accelerate its restructuring, it sparked a considerable rally in its stock. Its Q3 trading statement brought that to an abrupt halt, and it is probably unlikely to resume in the short term.
It is not that the Q3 report was really so shockingly bad. It is just that the quarter showed more of the same weak trends in developed world volumes and prices. Although emerging markets (accounting for 58% of Q3 revenue) continued their gradual improvement, it was uneven. Unilever does not release full earnings statements for its first and third quarters; it only offers a discussion of revenue trends. As a result, we will have to wait until the release of its annual results to learn anything about the success (or otherwise) of its promise to investors to step up its efforts at cost containment efforts.
Press reports suggest that the major item on Unilevers restructuring agenda sale of its margarine business is proceeding apace. Spreads below average revenue growth explains why it is destined for disposal, but its stand-alone profitability has never been disclosed. Price talk of 5.8 billion (and the reported interest of various buyout firms) for a business with revenue of about 2.9 billion suggests that it is a fairly muscular cash cow, if not a rapidly growing one. Unilevers repurchase of the minority interest in Unilever South Africa in exchange for its southern African spreads business (South Africa, Lesotho, Swaziland, Namibia and Botswana) plus cash, effectively valued it at 13.4X 2016 EBITDA. This also implies that spreads are solidly profitable.
And Unilever continues to make smart, targeted acquisitions: TAZO® (tea), Carver Korea (skin care), Mãe Terra (food), Pukka Herbs (tea), Weiss (ice cream), Hourglass (cosmetics) and Quala (personal care and home care), all since May (some of these have yet to close). It also has taken steps to rationalize its capital by repurchasing some rather expensive preferred shares, at a cost of 450 million.
It is small comfort to Unilever that it is not alone among consumer staples producers in facing challenges. Food retailers never shy about squeezing suppliers face ever more competition, putting Unilever et al. even further on the back foot. And as food retailing fragments, big brands lose shelf space at both premium and discount chains. They make up severely limited portions of Whole Foods, Trader Joes, Aldis or Lidls (all private) product offerings, and other retailers, including Wal-Mart (NYSE:WMT), are expanding their own-label selections. Pharmacy chains continue to consolidate, regaining some of the bargaining power they have lost to supermarket pharmacies. Consumer loyalty has weakened, so major brands are often wrong-footed by small producers (as happened to Unilevers Ben & Jerrys® this summer).
Many of Unilevers recent acquisitions are designed to address the threat of changing tastes and disruptive newcomers. The jury is still out, I think, on whether this strategy can really work. In other sectors, such as beer, majors buying upstarts has tended to stunt the upstarts growth, not least through robbing them of the caché associated with being an upstart. It is enormously difficult for makers of mass-market brands to be cool. Others, which I suspect are more certain
8.3m!! Right, where's my cv; I should be able to blag my way through for a year or so. Wonder if these guys get a probationary period where they have to suffer on 1 million or so until they prove they're worth the full amount.
The consumer goods behemoth Unilever has drafted in a top firm of headhunters to help board members identify a successor to Paul Polman, its veteran chief executive.
Sky News can reveal that the Anglo-Dutch giant behind Dove shampoo, Lynx deodorant and Ben & Jerry's ice cream has begun working with Egon Zehnder International, the search consultant, in a move which lays the foundations for Mr Polman's eventual departure.
The news will ignite a race for one of the top jobs in the global consumer products industry, although a formal recruitment process involving prospective candidates has yet to get under way.
A firm date for the retirement of Mr Polman, who has run Unilever since January 2009 and was paid 8.3m last year, has not yet been set, although some people close to the company expect him to step down in about 18 months.
Egon Zehnder's work is said to be focused at this stage on aiding the Unilever board's preparedness for a formal search process.
The company's stable of brands is one of the most admired in the global consumer goods sector, including Domestos, Surf, Hellmann's, Magnum, Brut and Toni & Guy.
Toast with Marmite, a Unilever brand, sits on a kitchen counter in Manchester, Britain October 13, 2016.
The preparations for Mr Polman's exit come at a time of significant change for the group, which is in the process of seeking a buyer for the £6.5bn unit that is home to spreads brands such as Flora and I Can't Believe It's Not Butter.
Earlier this year, Unilever became a short-lived takeover target for Kraft Heinz, the American company behind some of the world's biggest-selling food brands.
The £115bn approach, which was backed by Warren Buffett, the multibillionaire "Sage of Omaha", fell apart less than 72 hours after it emerged, amid hostility from the Unilever board.
Government ministers also expressed concern about potential cost-cutting measures that could be adopted by a Kraft Heinz management team known for its ruthless efforts to cut corporate overheads.
Since fending off that approach, Mr Polman has announced a string of measures to improve Unilever's performance, including the merger of its two main food businesses - a move which recently prompted the transfer of 140 UK-based jobs to Rotterdam.
Generic shot of PG Tips, made by FTSE 100 company Unilever
Image: PG Tips is a Unilever brand
A much more significant shift from the UK is also on the cards as Unilever moves towards axeing its dual corporate structure in the UK and Netherlands.
Analysts expect it to announce next month that it will move to a single Dutch headquarters, a decision which would be of enormous symbolic resonance at a time when Britain is attempting to demonstrate its economic resilience with Brexit looming.
Mr Polman has also been active as an acquirer of assets since the Kraft Heinz approach, buying businesses including Carver Korea, a skincare business in North Asia, for 2.27bn in September.
A former Nestle executive, Mr Polman has also played a leading role in efforts to boost the sustainability agenda in the corporate world, frequently appearing on public platforms to exhort his peers to do more to embrace environmental and social goals.
A formal search for his successor will ultimately be led by Marijn Dekkers, Unilever's chairman since last year, and will include fellow board members such as Vittorio Colao, the Vodafone chief executive.
Possible internal candidates to succeed Mr Polman may include Graeme Pitkethly, the company's finance director, although an extensive international search is almost certain to be carried out.
Unilever's London-listed shares have enjoyed a strong run during the last 12 months, trading up by more than a third to give the company a market capitalisation at Thursday's closing price of almost exactly £125bn.
The comment about the look through value when discounting the Indian high valuation is interesting -- bringing the balance of Unilever down to 18.5 P/E
I suppose that thought can be viewed in one of two ways of course.
""Unilever ended the month down 1.1%, but it felt worse, because on the 18th October the shares had
hit an all-time high of £45.48 and the fall over the next 10 days was 6% from there. Even after that
drop the shares remain up 29% year-to-date, so perhaps there is little surprise that some investors
should be looking for an excuse to take profits.
That excuse was the companys Q3 trading statement, which was disappointing, purportedly. Without
disentangling a single quarters results in excessive detail what was revealed was that Unilevers
developed market business shrank by 2.3%, while its emerging market business grew at over 6% to
get to a group growth rate of 2.6%. This divergence between developed and developing markets has
been a feature for some time and must be tending, as it progresses, to tilt the group ever more towards
where all the people are as Paul Polman has said.
Already Unilever has the joint second highest revenue exposure to emerging markets amongst its
peers, according to Morgan Stanley. ABI comes first, at 60%, with Unilever and, significantly for us,
Heineken both at 58%. Amongst other FGT holdings in the list Diageo at 40% and Mondelez at 35%
are advantageously positioned toward emerging markets too. Without getting starry-eyed about it
because the last few years have proven again how volatile emerging economies can be were sure
that these exposures will be at least a mitigating factor for the companies as consumer brands work
out how to readjust to the 21st century. We look at the share price return on Hindustan Unilever
(HUVR) its 67% owned Indian subsidiary as indicative of the excitement that investors may come
again to feel about the shares of the parent. HUVRs shares hit an all time high in the first week of
November 2017, up 56% so far in 2017 and properly performing for the first time since early 2015.
Over the last decade HUVRs shares have more than sextupled. This is both a nice reminder of the
rewards for patient investing into emerging markets, but also of how important an asset it has become
for the overall valuation of Unilever. The stake in the Indian subsidiary is now worth over £20bn, or
c16% of Unilevers market capitalisation. Given HUVR trades on over 50x prospective earnings, the
look through P/E of the rest of the group is lower than the headline about 18.5x, compared to 21x.
Elsewhere dogged work will be required to pick up the pace of Unilevers overall, global growth. But
we are encouraged by the dogged progress. It is significant that Food, which represented 33% of
group revenues in 2009, has now declined to 24% of the mix, because packaged food products are
probably most vulnerable to the 21st century. Meanwhile, as a result of acquisition and growth,
Unilevers Personal Care sales have increased from 30% to 38% of the whole - for choice offering
better prospects than food.
A near 3% dividend yield, with a dividend that has grown at nearly 10% pa over the last decade is no
reason to argue that Unilever is cheap we long ago realised that yield alone has no predictive value
for total share returns. But I still find it reassuring. ""
"Looking into next year, unless sterling magically recovers it looks like a projected EPS of 214.38 (wet finger in the air testing for wind direction of course) and a growth rate of 10% (Peg 2)... This makes the forward P/E 19.5 not 22."
Your P/E (actually 19.8x currently, not 19.5x) is on calendar FY 2018 - a period not reported for another 15-16 months or so. This is NOT the forward P/E, as commonly quoted... it is a potential P/E further out, if and when current forecasts are met. IF....
Market estimates and forecasts get rapidly less reliable the further out you look - and on an exponential, not linear basis. Forecasts a few months out (ie. around now, looking at FY 2017) tend to be much more accurate, but even a year out, they often prove to be wildly wrong... and two or more years out? The stuff of fantasy and fiction, most often... and we know that earnings forecasts from analysts and the like habitually tend to be too optimistic and are consistently revised down as we approach the relevant reporting date.
Just watch those FY 2018 forecasts come down if we get a vaguely soft Q1 report... and as you imply, any material movements in FX and watch them disappear in a puff of smoke. So I agree, the current FY cal 2018 P/E is around 20x - but even if this forecast is met, if you base any SP target off this figure, you then have to discount it back for the time value of money (ie, the period between now and next year, when it becomes the prevailing "forward P/E").
"My reference to misunderstood was related to the term staples and not discretionary and ULVR is definitely the latter..."
Consumer staples is merely one (unofficial) tag for the broad sector grouping... and refers to the overall market for the products, not any one individual provider. Washing powder is a "staple" item, people generally have to buy it (or something that does the same job) - but they don't have to buy it from ULVR. You are right, ULVR's own revenues are more "discretionary" than those overall across the markets in which they operate - but they can and should still be distinguished, as relatively defensive and/or acyclical, from those of true 'consumer discretionary' or consumer-cyclical businesses.
"I suppose you have to decide if you invest according to the voting machine or the weighing machine as they say !!"
If you are trading, I think you have to trade the voting machine... if you are investing, you have more choice. Personally, I think true investor should be looking at the weighing machine - but opinions differ. However, the vast majority of successful long term investors (private as well as professional) are most comfortable when exploiting, rather than following, the voting machine.
" You quote selected dates, but don't forget, it was down below £31 less than a year ago (fwd P/E around 18x) - and it's not hard to find periods when the P/E cycled down to around 14/15x."
Bill -- The dates selected are from each of the last 4 years and this one, so not that selective.
The share price of £31 and P/E of 18 is pretty relative to it's growth rates, which seem to be low for the years 12-13-14-15 and 16.
Yes there is a 20% hike in 2017 some due to currency and the P/E was(or is today) 21.5
Looking into next year, unless sterling magically recovers it looks like a projected EPS of 214.38 (wet finger in the air testing for wind direction of course) and a growth rate of 10% (Peg 2).
This makes the forward P/E 19.5 not 22.
My reference to misunderstood was related to the term staples and not discretionary and ULVR is definitely the latter -- in the same way that Aldi and Lidl are not discounters -- they sell at the listed and displayed prices -- all the discounting and cheating is done by Tesco-SBRY-MRW-ASDA.
Still as you say there are myriad ways to value stuff and everyone has a different view.
I suppose you have to decide if you invest according to the voting machine or the weighing machine as they say !!
"On valuation, I honestly don't think they have ever looked at the numbers, but just listen to soundbites... From a simple observation, ULVR might still be cheap... Unilever forward P/E is 19X -- which on balance is at the lower end of it's spectrum, having been 18.6 in 2012, 20.7 in 2014 and 23 in 2015, 21.1 in 2016?"
Gentlemen in glass houses, Games? I make the forward P/E more like 22x on the current SP (precisely, 21.8x), which puts a rather different slant on it... down from the all-time highs we were seeing only recently, but still well into the upper end of the long-term historical range. You quote selected dates, but don't forget, it was down below £31 less than a year ago (fwd P/E around 18x) - and it's not hard to find periods when the P/E cycled down to around 14/15x.
Valuation is a pretty subjective game, often as much art as science, with very few "absolute truths". And this will often produce dramatic differences of opinion, on the same source information... on the one hand, John Kingham (as you mention) queries whether it's worth more than 14x, on the other, Michael Lindsell attests it has always been undervalued, you should be prepared to pay 50x P/E and it will still reward you over the long term.
"Is the company misunderstood?"
So no, I think the company is WELL understood. But... how do you value the stock, and its long term prospects, from here?? Aye, there's the rub.... entirely different questions, really.
All we know is, the market is currently prepared to pay a lot more (as a multiple) than it was a year ago for ULVR, a significant premium to its long term historical mean, and a massive premium - much bigger than normal - to a whole series of currently unloved, unwanted "value" plays, despite many of them sharing at least some attractive characteristics with ULVR.
As such, I wouldn't buy it, or anything with that kind of profile, it's not my bag... But, does it all make ULVR "expensive", or "cheap"?? That is the game, and a guessing one - it always is. We simply don't know, and only time will tell us...
Went to the AJ Bell seminar last night - well put together.
Many of the presenters seemed to harp on about the dangerous overvaluation of consumer staples and quoted companies like RB/ULVR etc.
My first thought was -- perhaps they don't really understand these companies anyway?
Is the category consumer staples completely wrong for RB/ULVR?
Their products seem definitely discretionary to me given you don't have to use their soap to wash yourself or their anything for that matter since all are available from a myriad of suppliers.
On valuation, I honestly don't think they have ever looked at the numbers, but just listen to soundbites.
From a simple observation, ULVR might still be cheap -- I say might because the whole market might be crazy of course and everything is ultimately interlinked to a degree.
Unilever forward P/E is 19X -- which on balance is at the lower end of it's spectrum, having been 18.6 in 2012, 20.7 in 2014 and 23 in 2015, 21.1 in 2016?
Is the company misunderstood?
UK Value Investor thinks it's only worth buying at £23 !!!!
Games -- I'm wondering about making this more than 3,68% of my wad
Not surprising Dutch unions taking a stand, it reads as if it could affect all ULVR business not just those for sale. Like the products in question, strikes spread.
Unilevers Dutch Works Council is threatening to call for strike action across the consumer goods giants global factories if potential buyers of its margarine business dont agree to protect jobs and pension guarantees.
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